Fishing News
Let’s talk about growing your business
CONTENTS Page 3 Page 4 Page 6 Page 7 Page 8 Page 10 Page 11
Editorial Introduction by Billy Smith. Tax Planning Hints Advice on how to minimise tax liabilities. Seafish Annual economic survey of the UK fishing fleet. Slipper Skippers Where to now? Cast a Wide Net to Increase Your Investment and Retirement Options What’s the difference between a SIPP and a Private Pension? Business Health Check Are you getting the most out of your company? Our Fishing Team Meet the Johnston Carmichael Fishing news team.
Johnston Carmichael is the trading name of Johnston Carmichael LLP, a Limited Liability Partnership registered in Scotland (SO303232). The registered office is at Bishop’s Court, 29 Albyn Place, Aberdeen AB10 1YL. The term “Partner”, used in relation to the LLP, refers to a member of Johnston Carmichael LLP. A list of the members of Johnston Carmichael LLP is available for inspection at our offices and on www.jcca.co.uk. Johnston Carmichael is a member of the Leading Edge Alliance, an international association of independently owned accounting firms. Disclaimer: While all possible care is taken in the completion of this newsletter, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained herein can be accepted by this firm. Published by Johnston Carmichael, Bishop’s Court, 29 Albyn Place, Aberdeen AB10 1YL. Registered to carry on audit business in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in Scotland. FN/0513
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EDITORIAL The last 12 months have been difficult for the fishing industry, in particular for the Whitefish and Prawn sectors. High fuel prices continue to be a major factor, as well as the worldwide recession, which has seen a reduction in demand from Europe. The tough stance being taken by Banks is also a cause for concern. The regulatory burden continues for our hard-pressed fishermen, and the recent television series of the Fish Fight has, in some instances, damaged the reputation which the industry had worked very hard to build. However, one positive thing which appears to have come out of this series, is that our local fishermen have reacted in a positive manner, launching, for example, the campaign for the ‘Real Fish Fight’ where they are trying to present a more realistic, and balanced view of the industry, presenting hard facts to back up their points. We wish these campaigners every success.
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Within this issue of the newsletter we have included articles on valuable tax planning, the ownership of fishing quotas, how to expand your investment and retirement options, and a timely piece to remind you that giving your business an annual health check can be highly beneficial. At Johnston Carmichael we believe in working closely with the fishing industry and giving our clients the best advice to help them through these challenging times. Our dedicated specialist team, located in Fraserburgh, Aberdeen and Peterhead, look after a large number of vessels spread across the sector. We also advise a large number of onshore businesses connected with the fishing industry. For more information on how Johnston Carmichael can help you, please get in touch with us, or visit our website www.jcca.co.uk for more details.
Billy Smith Head of Fishing Team and Managing Partner Fraserburgh office T: 01346 518165
May 2013
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TAX PLANNING HINTS
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Johnston Carmichael
As tax advisers, one of the most important things we do for our clients is to provide advice on how to minimise their tax liabilities. We are constantly looking at legislation to see what ideas could be beneficial for our clients and also any changes which our clients have to comply with. Here are just a few of the more topical items which we have been discussing with various clients. This is by no means a definitive list, but includes some of the issues which you should be considering either for yourself, or for your business. Charitable Giving In addition to giving a charity extra funding, making gift aid payments can reduce your Income Tax Liability. Gifts can be made from a number of assets other than cash, such as Company Shares and additional rate taxpayers can obtain up to 45% tax relief on gift aid donations after 6 April 2013.
“ You should also review your Will and update it where necessary to ensure that it is still appropriate in light of your current financial and personal circumstances”
Business Planning The Annual Investment Allowance (AIA) increased from £25,000 to £250,000 for two years as from 1 January 2013. Therefore make the most of this large increase, and note the timing of expenditure to maximise allowances. You should review business interests/assets that are likely to be sold within the next two years and check if they qualify for entrepreneurs’ relief. Entrepreneurs’ relief reduces the Capital Gains Tax Rate for small businesses from 28% to 10%.
Real Time Information (RTI) This new legislation which was introduced by the Government from 6 April 2013 affects all businesses who pay wages/salaries. This includes limited companies for fisherman, who pay a monthly salary to the Directors. Businesses must ensure that their payroll systems are compatible, to allow the Real Time Information to be lodged online with the HM Revenue & Customs (HMRC), each time salaries are paid. Businesses with nine or fewer employees may be able to use the HMRC’s free software. Fishing News
Tax Shelters and General Planning The Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) provide Tax Shelters and the opportunity to defer tax. Subscribers to these schemes can enjoy income tax relief at 30%. EIS investments also benefit from the investment being exempt from Capital Gains Tax (CGT) on a disposal. In addition CGT deferral relief may be available on an EIS investment, allowing you to defer gains in a tax year by subscribing for EIS shares. Following on from this, the Seed Enterprise Investment Scheme (SEIS) was introduced with effect from 6 April 2012 which offers 50% Income Tax Relief on qualifying Investments (up to £100,000 ). SEIS also offers a complete CGT exemption for gains arising in 2012/13 providing the SEIS Investment is made in 2012/13 or 2013/14. You should also make full use of your ISA limits where possible, £11,520 in total, (with up to £5,760 in a Cash ISA) and consider investing in a Junior ISA for children under the age of 18. Up to £3,720 can be invested per annum and is free from income tax and CGT.
Alana Higgins Senior Tax Manager Aberdeen office T: 01224 212222
Inheritance Tax (IHT) Various gifts can be made during your lifetime to mitigate any potential IHT burden on your death, with some gifts being completely exempt from tax. Therefore don’t miss the opportunity to use the annual exempt amount of £3,000 (and also last years’ exemption if this has not already been used). In addition, you can make a gift up to a total of £250 per tax year to any individual each tax year. This small gifts exemption cannot be combined and used with the annual allowance of £3,000. You should also review your Will and update it where necessary to ensure that it is still appropriate in light of your current financial and personal circumstances. If you have any questions on any of the above topics, please do not hesitate to contact us. 5
GUEST ARTICLE By Seafish
The Seafish economics team has started work on the annual economic survey of the UK fishing fleet and is keen to hear from vessel owners and skippers from all sectors of the industry. The main objectives of the survey are to gather, analyse and publish the latest available information on fleet economic performance. The results are intended to help industry and policy makers better understand the socioeconomic consequences of changes in fisheries management measures and the wider financial climate. Seafish will collect data on annual fuel, quota leasing, gear and repair costs along with the many other costs involved in running a fishing business. All survey information is treated as confidential and no individual vessel figures will be revealed in any report. Seafish is grateful that the survey is once again being supported by the national federations and local associations. Bertie Armstrong, chief executive of the SFF said: “The SFF fully supports the Seafish Economics Fleet Survey as the more clarity that there is in the economics of the fishing industry, then the better placed we are for the implementation of appropriate management measures for our fisheries.” Barrie Deas,
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chief executive of the NFFO added: “The stronger the economic information available, the stronger our ability to make the industry’s arguments to Government at national and EU level. That is why we at the NFFO consider this survey and vessel owners participation to be so important.” Anne-Margaret Stewart, Project Manager at Seafish said: “The survey has been very well received by industry in previous years and we are looking to build on that again this year. The more vessel owners that take part, the more robust the results will be. Last year we interviewed almost 600 fishermen and this year we aim to interview even more.“ Those who take part in the survey can benefit directly by requesting a financial performance benchmark report. These reports allow vessel owners to compare the performance of their own vessel with the average performance of the fleet segment to which their vessel belongs. The survey will be conducted by Seafish economics staff who will visit fishing communities around the UK over the summer. For more information please contact Anne-Margaret Stewart on 0131 524 8669 or at Anne.Stewart@seafish.co.uk or visit our website at www.seafish.org where you can complete the survey online and view the results from previous years surveys.
Johnston Carmichael
SLIPPER SKIPPERS Where to now?
Recent steps taken by Government agencies to try to find out who own fishing quota, other than active fishermen, is in itself perhaps only a fact finding exercise. However, it may be naive to assume that there are no other motives. Over the last 15 years or so, many boats have been scrapped/decommissioned, taking a significant amount of fishing effort out of the industry. This has, in many instances, left the former boat owners with the quota. These owners, known as ‘Slipper Skippers’, have been able to hire out their quota at a good rate of return. The Fixed Quota Allocation has in many instances been allocated by the Producers Organisations (PO) on to a dummy vessel. It is only recently that the Government has asked the POs to confirm who owns the quota on the dummy vessel and to allocate the owner to a particular category. This will provide the Government with a full register. Now armed with this information, the question is, “what is the Government going to do with it and what are the implications for owners and the wider industry?” Most owners of fishing vessels we act for complain about the high cost of hiring in quota. I suspect that this group would be pleased if the Government decided to put the ownership of the quota back in the hands of those actively fishing it. Such a move could mean a large drop in the value of quota if a large amount came onto the market. A three year time period to dispose of quota may make this easier to swallow for the sellers. A similar time limit may be imposed on any active fisherman who leaves the industry. The commercial and tax implications of these steps
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need to be considered. What you do will depend on what you think the Government may do. For example, do you sell now before a ‘forced sale’ regime is imposed and therefore secure the best possible price but possibly regret it when nothing happens? Alternatively, do you continue to hire out your quota and then regret this decision if the value of quota for sale drops 50% overnight? However, a disposal by a Slipper Skipper will result in increased exposure to CGT. How this is taxed depends whether the quota is owned by individuals or by a company. The Capital Gains Tax will be calculated on the difference between the sale price and the cost. HM Revenue & Customs will want to tax individuals at 28% on any gain as they will argue that quota hire is investment income and you are selling an investment rather than a business asset. There will be cases where a proper presentation of the facts will lead to a 10% tax charge and this is an where we can help. A company will pay 20% - 23% Corporation Tax on any gain after any indexation allowance on the original cost. Those wishing to buy quota, whether they are POs, boat owners or even vessel agents will have to find the funds to do this. Obtaining funding from banks may prove problematic and will depend largely on the current state of the balance sheet of the business. A large drop in the value of quota may mean the banks are less keen to lend to buy quota. Demonstrating that the saving in quota hire costs will exceed any borrowing costs should be fairly straightforward, but in the present climate may not be enough for the bank to provide the facility needed. It is likely cash will be king.
Mike Pitman Partner Fraserburgh office T: 01346 518165
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CAST A WIDE NET TO INCREASE YOUR INVESTMENT AND RETIREMENT OPTIONS
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Johnston Carmichael
With the many changes that have happened in the pension industry over the last few years, and the current economic climate in which we find ourselves, it is little wonder that there is a lot of confusion and reluctance towards saving for retirement. However, pensions still offer one of the most flexible, tax efficient ways of planning for retirement. Increasingly, Self Invested Personal Pensions (SIPPs) are becoming the pension of choice for investors seeking to take control of their retirement planning. What is a SIPP? Self Invested Personal Pensions offer more control and a wider investment choice than most traditional pensions, with the same great tax benefits as other pensions. What’s the difference between a SIPP and a Private Pension? SIPP’s, Stakeholder Pensions and Personal Pensions are all loosely called ‘Private Pensions’ since they are taken out by individuals, however they can accept personal and company contributions. They all work in a similar way in that they all get the same favourable tax treatment. The main differences are the investment choices and the charges. Stakeholder Pensions are the simplest Private Pensions. They have the least investment choice and their charges are capped. They are designed for those who want very simple Private Pensions and do not need the flexibility of the greater investment choice a SIPP provides. Personal Pensions offer more investment choice than Stakeholder Pensions and do not have a cap on charges. They often include links to funds from external investment houses, such as Invesco Perpetual and Jupiter. SIPPs provide the ultimate in investment choice, with virtually unlimited access to investment house funds, shares, investment trusts and also cash options. Unlike Stakeholder Pensions, their charges are not capped and whilst there are low cost SIPPs available, the choice and flexibility they provide does mean they are often more expensive than a Stakeholder or Personal Pension.
contribution of £200,000, last three years plus current year (subject to certain requirements being met). Care must be taken when making such sizeable pension contributions that you have sufficient taxable earnings to ensure that you qualify for the higher rate or additional rate tax relief and that the pension contributions do not breach the lifetime limit for your pension fund (currently £1.5 million). From 6 April 2014, the annual pension allowance is being reduced to £40,000 per annum and the lifetime limit for pensions is being reduced to £1.25 million. With many fishing enterprises being limited companies, another alternative would be to have the limited company make the pension contribution. This is a very tax efficient method of extracting funds from these companies. Transitional fixed protection will be introduced for individuals who believe that they may be affected by the reduction in the lifetime allowance. Remember it is possible to contribute to a pension without having any employment income. For example a non-earning individual, whether it be your spouse or civil partner, children or grandchildren can have a contribution paid up to £2,880 per annum to a pension, giving a gross contribution of £3,600 when taking into account the 20% income tax relief obtained from the government. You should ensure that you seek specialist advice regarding your pension arrangements prior to undertaking any pension planning and making your pension contribution.
“ Currently the Government estimates that around seven million people have little or no provisions for retirement”
Pension Contributions and Annual Limits Provided that you have sufficient taxable income, all eligible pension contributions made during the tax year receive basic rate tax relief at 20%. For higher rate and additional rate taxpayers with sufficient earnings, they can contribute up to £50,000 into their pension pot and obtain additional tax relief of up to a further 25% relief. Taxpayers can carry forward the last three years of any unused pension’s annual allowance giving a maximum Fishing News
Graham Burnett Director and Chartered Financial Planner Aberdeen and Fraserburgh office T: 01346 518165
Workplace Auto-Enrolment Currently the Government estimates that around seven million people have little or no provisions for retirement. In a move to encourage more people to save for their retirement the Government rolled out measures on the 1 October 2012 that will place new duties on employers to automatically enrol all ‘eligible jobholders’ into a qualifying pension scheme. This will be done in stages depending on the size of the employer, with minimum contributions also being phased in. The fishing sector needs to be prepared for these changes. With contract and temporary staff also falling under the rules, the implications for fishing businesses are significant. At Johnston Carmichael we are able to assist you in setting up and administering a scheme which will then allow you to focus on your business. If you would like more information on any of the issues covered in this article, please contact me. Johnston Carmichael Financial Services Limited is authorised and regulated by the Financial Conduct Authority. This article is for general guidance and is based on our understanding of current legislation and Inland Revenue practice, as at the date of writing, that is subject to change. Please remember the value of investments can go down as well as up and you may not get back the amount you originally invested. Professional advice should be sought before acting.
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BUSINESS HEALTH CHECK
ARE YOU GETTING THE MOST OUT OF YOUR COMPANY?
Wilma Lynne Bruce Senior Client Relationship Manager
A business health check can be a daunting prospect for business owners however, having an annual check-up can be of great benefit. Every business requires expert professional support and in the ever changing economic climate it has become increasingly important to obtain advice you can rely on. Johnston Carmichael has devised a tool which we are using to ‘health check’ businesses to ensure opportunities for efficiencies and savings are grasped and payment of tax is minimised. By looking closely at the business, our specialists can identify cost efficiencies and suggest ideas that challenge existing practices and lead to business performance improvements.
Fraserburgh office T: 01346 518165
Some of the issues we can look into include: • R emuneration planning at pre-year end meeting, Wage v Dividend v Bonus v Pensions • Are all expenses allowed by a business actually being claimed? This can significantly reduce profits chargeable to tax. • Minimise tax liabilities for both individuals and companies. Is the business structured in the best manner? • Extraction of funds – how do you get your money out of the business whilst in operation and when it ceases, without paying too much tax? • Best planning for the timing of income and expenditure and claiming of allowances. • Are you complying with statutory and reporting requirements – filing of accounts, RTI (Real Time Information) and insurances. Contact us to find out if your business would get a clean bill of health. Talk to our team who will run your business through the health check and discuss the areas where Johnston Carmichael can help your business become more profitable.
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Johnston Carmichael
OUR FISHING TEAM We understand that you are inextricably linked to the business itself and we appreciate that we can only help your business properly if we also fully understand you, your personal goals and individual aspirations. Whether you are a valued client already or new to our services, our team are always at hand to answer your queries or offer advice, so please get in touch with us.
Billy Smith
Mike Pitman
Office Managing Partner
Partner
Fraserburgh Office
Fraseburgh Office
T: 01346 518165
T: 01346 518165
E: billy.smith@jcca.co.uk
E: mike.pitman@jcca.co.uk
Gerry McDonald
Alex Martin
Partner
Director
Aberdeen Office
Aberdeen Office
T: 01224 212222
T: 01224 212222
E: gerry.mcdonald@jcca.co.uk
E: alex.martin@jcca.co.uk
Wilma Lynne Bruce
Alana Higgins
Senior Client Relationship Manager
Senior Tax Manager
Fraserburgh Office
Aberdeen Office
T: 01346 518165
T: 01224 212222
E: wilmalynne.bruce@jcca.co.uk
E: alana.higgins@jcca.co.uk
Graham Burnett Director and Chartered Financial Planner Aberdeen and Fraserburgh Office T: 01224 259373 / 01346 518165 E: graham.burnett@jcifa.co.uk
If you wish to receive further editions of our Fishing newsletter please email marketing@jcca.co.uk
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For further information and advice please contact your nearest Johnston Carmichael office:
Aberdeen
01224 212222
Edinburgh
0131 220 2203
Elgin
01343 547492
Ellon
01358 720712
Forfar
01307 465565
Fraserburgh
01346 518165
Glasgow
0141 222 5800
Huntly
01466 794148
Inverness
01463 796200
Inverurie
01467 621475
Perth
01738 634001
Stirling
01786 459900
www.jcca.co.uk